Lovins has written a guest post for us today, which I am guessing that everyone who cares about energy will find instructive in one way or another. It is especially interesting in light of forward-looking projects like this one about battery-exchange stations for electric cars — for as eager as we may be to wean ourselves from oil, it’s worth remembering that all that newly-demanded electricity doesn’t grow on trees.

Does a Big Economy Need Big Power Plants?
By Amory B. Lovins
A Guest Post

If I told you, “Many people need computing services, so we’d better build more mainframe computer centers where you can come run your computing task,” you’d probably reply, “We did that in the 1960′s, but now we use networked PC’s.” Or if I said, “Many people make phone calls, so we’d better build more big telephone exchanges full of relays and copper wires,” you’d exclaim, “Where have you been? We use distributed packet-switching.”

Yet if I said, “Many people need to run lights and motors, Wii’s, and air conditioners, so we’d better build more giant power plants,” you’d probably say, “Of course! That’s the only way to power America.”

Thermal power stations burn fuel or fission atoms to boil water to turn turbines that spin generators, making 92 percent of U.S. electricity. Over a century, local combined-heat-and-power plants serving neighborhoods evolved into huge, remote, electricity-only generators serving whole regions. Electrons were dispatched hundreds of miles from central stations to dispersed users through a grid that the National Academy of Engineering ranked as its profession’s greatest achievement of the 20th century.

This evolution made sense at first, because power stations were costlier and less reliable than the grid, so by backing each other up through the grid and melding customers’ diverse loads, they could save capacity and achieve reliability. But these assumptions have reversed: central thermal power plants now cost less than the grid, and are so reliable that about 98 percent to 99 percent of all power failures originate in the grid. Thus the original architecture is raising, not lowering, costs and failure rates: cheap and reliable power must now be made at or near customers.

“Central thermal stations have become like Victorian steam locomotives: magnificent technological achievements that served us well until something better came along.”

Power plants also got irrationally big, upwards of a million kilowatts. Buildings use about 70 percent of U.S. electricity, but three-fourths of residential and commercial customers use no more than 1.5 and 12 average kilowatts respectively. Resources better matched to the kilowatt scale of most customers’ needs, or to the tens-of-thousands-of-kilowatts scale of typical distribution substations, or to an intermediate “microgrid” scale, actually offer 207 hidden economic advantages over the giant plants. These “distributed benefits” often boost economic value by about tenfold. The biggest come from financial economics: for example, small, fast, modular units are less risky to build than big, slow, lumpy ones, and renewable energy sources avoid the risks of volatile fuel prices. Moreover, a diversified portfolio of many small, distributed units can be more reliable than a few big units.

Bigger power plants’ hoped-for economies of scale were overwhelmed by diseconomies of scale. Central thermal power plants stopped getting more efficient in the 1960′s, bigger in the 1970′s, cheaper in the 1980′s, and bought in the 1990′s. Smaller units offered greater economies from mass production than big ones could gain through unit size. In the 1990′s, the cost differences between giant nuclear plants — gigantism’s last gasp — and railcar-deliverable, combined-cycle, gas-fired plants derived from mass-produced aircraft engines, created political stresses that drove the restructuring of the utility industry.

Meanwhile, generators thousands or tens of thousands of times smaller — microturbines, solar cells, fuel cells, wind turbines — started to become serious competitors, often enabled by IT and telecoms. The restructured industry exposed previously sheltered power-plant builders to brutal market discipline. Competition from a swarm of smaller electrical sources and savings created financial risks far beyond the capital markets’ appetite. Moreover, the 2008 Defense Science Board report “More Fight, Less Fuel” advised U.S. military bases to make their own power onsite, preferably from renewables, because the grid is vulnerable to long and vast disruptions.

Big thermal plants’ disappointing cost, efficiency, risk, and reliability were leading their orders to collapse even before restructuring began to create new market entrants, unbundled prices, and increased opportunities for competition at all scales. By now, the world is shifting decisively to “micropower” — The Economist‘s term for cogeneration (making electricity and useful heat together in factories or buildings) plus renewables (except big hydroelectric dams).

The U.S. lags with only about 6 percent micropower: its special rules favor incumbents and gigantism. Yet micropower provides from one-sixth to more than half of all electricity in a dozen other industrial countries. Micropower in 2006 (the last full data available) delivered a sixth of the world’s total electricity (more than nuclear power) and a third of the world’s new electricity. Micropower plus “negawatts” — electricity saved by more efficient or timely use — now provide upwards of half the world’s new electrical services. The supposedly indispensable central thermal plants provide only the minority, because they cost too much and bear too much financial risk to win much private investment, whereas distributed renewables got $91 billion of new private capital in 2007 alone. Collapsed capital markets now make giant projects even more unfinanceable, favoring lower-financial-risk granular projects even more.

In short, many, even most, new generating units in competitive market economies have already shifted from the million-kilowatt scale of the 1980′s to the hundredfold-smaller scale that prevailed in the 1940′s. Even more radical decentralization, all the way to customers’ kilowatt scale (prevalent in and before the 1920′s), is rapidly emerging and may prove even more beneficial, especially if its control intelligence becomes distributed too.

Global competition between big and small plants is turning into a rout. In 2006, nuclear power worldwide added 1.44 billion watts (about one big reactor’s worth) of capacity — more than all of it from uprating old units, since retirements exceeded additions. But that was less capacity than photovoltaics (solar cells) added in 2006, or a tenth what windpower added, or 2.5 percent to 3 percent of what micropower added. China’s nuclear program, the world’s most ambitious, achieved one-seventh the capacity of its distributed renewable capacity and grew one-seventh as fast. In 2007, the U.S., Spain, and China each added more wind capacity than the world added nuclear capacity, and the U.S. added more wind capacity than it added coal-fired capacity during 2003 to 2007 inclusive.

What part of this story does anyone who takes markets seriously not understand? Central thermal stations have become like Victorian steam locomotives: magnificent technological achievements that served us well until something better came along. When today’s billion-watt, multi-billion-dollar plants retire, we won’t replace them with more of the same. I’m already experiencing a whiff of prenostalgia.

COMMENTS: 87

Bigger is not better. Governments don’t understand that yet eitiher. Interesting that during Enron’s rule our local paper company brought in some generators and parked them outside the plant. It was cheaper than getting electricity through the grid. The other question comes up as to pollution from multiple sources versus handling it from one main location where it is easier to monitor.

This makes for good reading, but links to original sources. would have been nice. They could, for example, allow me to check which of the statements about price advantages and competetiveness carry over to other countries.

Whenever solar and wind power comes up in discussions like this, and is contrasted with coal-burning, gas-burning, or nuclear power generation, I’m also amazed at the people who attempt to compare renewables with resource-depleting. I realize that solar power, for example, isn’t terribly efficient just yet. But it’s getting better every year, and eventually it’ll be just fine in that regard… because the solar energy is already raining down on us, every day, just waiting to be used. Imagine if coal fell from the sky and had no negative effect on our atmosphere when burned? Wouldn’t we be crazy not to use it? Instead, it comes out of the ground, takes millennia to form and kills us in all kinds of ways when we burn it. Sunlight? Not so much! Solar and wind power are just waiting to be used, and no matter how much we use today, there’ll be just as much waiting for us tomorrow… and next year… and next century… and long after we’ve died off as a species.

Even if solar power costs more in the short term, the source of that power lasts until our sun burns out (by which time, if we’re still around, we’ll have much bigger issues to deal with than the loss of some solar power).

Are people really that stupid that they can’t see how fundamentally different those two categories of energy sources are?

As always, Amory Lovins has very insightful and interesting ideas. I like to read his writings and listen to his speeches.

But Lovins has a terrible track record in predicting the future. He’s been wrong for decades. I think he is wrong here as well.

Micropower makes a lot of sense in a lot of cases. But it’s not taking over the world. Not now, and (I think) not in the future either.

Of course, I’m only a few years younger than the Prophet of Snowmass, and I’ve done no better at predicting the future. I’ve invested a fair amount of money in wind energy over the past two decades. I’ve lost it all.

Since posting my comment above, I read Lovins’s report Nuclear Power: Climate Fix or Folly? That report covers the same ground as this Lovins guest post, but in much more detail.

I’m not convinced that wind and solar electricity are better than nuclear electricity. Look to France and Denmark for a comparison as to how nuclear and wind do in the real world at generating electricity.

France produces 80% of its electricity from nuclear (and most of the rest from hydro). Its electricity generates the least (per capita) carbon dioxide in Europe at the cheapest price in Europe.

Denmark has the capacity to generate 20% of its electricity from wind. Yet Denmark’s electricity generates the most (per capita) carbon dioxide in Europe at the most expensive price in Europe.

In practice, there are lots of reasons why that is. And that is not to say that all countries would be better off abandoning wind and solar and going with nuclear.

That being said, Lovins’s proposals work on paper but not in the real world. History has shown they do not work. And history has shown us what will work. Watch Nobody’s Fuel, by Douglas Lightfoot, to see more about that.

AC is less efficient for long distance power transmission. Look it up, the problem is with impedance. The overhead of conversion into DC is worthwhile for lines long enough to be a quarter-wavelength of a 60Hz signal. An AC signal along a wire of that length effectively causes the line to behave like an antenna, radiating energy.

Just pointing that out for a previous commenter.

As for the distributed computing analogy, well, it also depended upon sophisticated networking infrastructure which allows every node to participate as fully as possible. That isn’t so easy for our power distribution hierarchy.

As usual, Lovins has produced a seductive piece that contradicts itself in several ways. Unfortunately, like many glib people who have more training in sales than in physics, he is able to convince some of the people some of the time.

He confuses capacity with production – in Lovins world a kilowatt of capacity from emergency generator purchased by a cell phone provider that runs a couple of hours per year from a local fuel tank counts just as much as a kilowatt of capacity from a nuclear power plant that runs 8050 hours per year. In the real world, the nuclear kilowatt of capacity produces thousands of times more useful power when most people need it – nearly all the time.

He talks about how most power failures occur in the grid, not the power plant, and then advises that a microgrid of small, distributed units can be more reliable than our current model. The problem with that statement is that central station power plant reliability is partially a result of careful engineering, redundancy and professionally trained operators that would not exist if units are too small. Microgrids also have many of the same vulnerabilities of the existing grid, but they will be less carefully engineered and less carefully maintained.

Lovins likes to use the evolution of computers as an analogy, but anyone who is commenting here who has paid close attention to the computer revolution knows that reliability has not been its strongest measure of effectiveness. They also should know that local area networks are difficult beasts to manage, especially if there are a wide variety of devices on the network, each with special characteristics. Network admins know that mixing up a bunch of different operating systems can provide headaches, electrical power network admins know quite a bit about the challenges of mixing in intermittent sources like wind and solar, small and relatively unreliable sources like gasoline generators, medium sized and very expensive marginal cost generators like natural gas fired turbines, and large, low marginal cost generators like nuclear and coal.

Lovins definition of “micropower” also happens to include some existing nuclear power plants in places like Sweden, Russia and Switzerland since they are designed and operated to use the waste heat from electrical power production for district heating in a cogeneration mode. There are also a large number of “cogeneration” nuclear plants operating out on the ocean that use waste heat for a variety of useful purposes. Bet he did not know that.

As William Tucker pointed out, Lovins is not totally wrong – there are some significant advantages to right sized power plants that can be manufactured in a factory rather than stick built and that can be delivered in far less time than is typically assumed for a large central station power plant of any kind. There are at least three companies who have publicly announced plans to build nuclear power plants in unit sizes of less than 50 MWe (150 MW thermal). They are Toshiba, which has designed a 10 MWe unit that can run for 30 years without new fuel; Hyperion, which has designed a 70 MW thermal heat source useful for assisting in enhanced oil recovery, district heating and which can be connected to a 27 MWe steam turbine for power production; and NuScale, which has designed a 45 MWe power plant that can be delivered as a single 300 ton unit to a site that has water or rail access.

For my money, those smaller nuclear plants have a HUGE advantage over the types of systems that Lovins advocates – they produce reliable power without producing ANY polluting emissions at all. They also need very little in the way of fuel delivery infrastructure. In a world powered by Lovins microgrids, there will be a large demand for diesel fuel and natural gas to fuel the generators that must back-up intermittent wind and solar power. That vision also includes a whole lot of excess capacity that must sit idle for much of its existence.

One final thought. When listening to a salesman like Lovins, it is always important to understand where his bread is buttered. During a Democracy Now! interview in July 2008, Lovins let slip just why he has been so adamantly opposed to nuclear and so interested in fossil fueled micropower for his entire career as an energy “guru”:

“You know, I’ve worked for major oil companies for about thirty-five years, and they understand how expensive it is to drill for oil.”

I think that says it pretty clearly. Lovins has some very powerful friends with plenty of money to back his marketing campaigns. You can find my own disclosure below.